How do I remove a pension balance from my investments after it has converted to payments?

cls4

I had a cash balance pension plan that I carried as an investment and incorporated into investment allocation as bonds. I recently started receiving pension payments. The plan administrator purchases an immediate fixed annuity with the cash balance. I no longer have an asset. In its place I have a lifetime income stream. What is the best way to remove the pension cash balance from my investment list?

I use Quicken for Windows.

Jim_Harman

It sounds like you were using a security to track the cash value of the pension.

You could enter a Removed transaction for that security. That will reduce your net worth without affecting the cash balance of the account.

cls4

Yes, I was using a made up security to track the pension balance. It was not downloadable so I updated the value manually every few months. Thank you for suggesting a remove transaction. It is going to hurt a little to see my net worth drop by a chunk, but it reflects reality and is probably the cleanest way to reflect the change. In exchange, I get a deposit to my checking account every month.

I appreciate your quick and clear answer.

NotACPA

I'm receiving an annuity from a former employer. I've carried it, in it's own account, for years as CASH.

Every month, when I receive that annuity payment, I record it as a transfer from the Annuity account into my checking account.

In 16 months, when I've (hopefully) outlived the balance in the Annuity account, I'll switch to using an income category. The 16th payment from the annuity account (which takes it to $0) won't be sufficient to cover the total payment, so that txn will be part transfer and part income.

Using this method, the only drop in my net worth is when I spend that transfer to the checking account … because the Annuity to checking xfer doesn't change my Net Worth.

Jim_Harman

It sounds like you were using a security to track the cash value of the pension.

You could enter a Removed transaction for that security. That will reduce your net worth without affecting the cash balance of the account.

cls4

Yes, I was using a made up security to track the pension balance. It was not downloadable so I updated the value manually every few months. Thank you for suggesting a remove transaction. It is going to hurt a little to see my net worth drop by a chunk, but it reflects reality and is probably the cleanest way to reflect the change. In exchange, I get a deposit to my checking account every month.

I appreciate your quick and clear answer.

NotACPA

I'm receiving an annuity from a former employer. I've carried it, in it's own account, for years as CASH.

Every month, when I receive that annuity payment, I record it as a transfer from the Annuity account into my checking account.

In 16 months, when I've (hopefully) outlived the balance in the Annuity account, I'll switch to using an income category. The 16th payment from the annuity account (which takes it to $0) won't be sufficient to cover the total payment, so that txn will be part transfer and part income.

Using this method, the only drop in my net worth is when I spend that transfer to the checking account … because the Annuity to checking xfer doesn't change my Net Worth.

cls4

Thank you for the response. It does soften the decline in net worth. I want to record the pension payments as gross income with Fed and State tax withholding and the net payment as a deposit to my checking account. This will help me in my tax planning on Quicken. Tax withholding is mandatory on the pension payments. For this reason, I think removing the balance in the pension asset is my preferred solution. Also, I don't have any access to the pension balance anymore. At a point in the past I could have rolled it to an IRA so I considered it an investment.

NotACPA

You can set the Tax Attributes of that Pension account so that any transfers out of the account are recorded against the appropriate Gross tax line.

Then, record a split transaction in your checking account so that the NET received is recorded in checking with 2 split lines. The 1st line shows the transfer from the Pension account as a positive number … and the 2nd would be the Taxes w/h as a negative number.

THUS, with my method, you get it both ways … Net worth is maintained and taxes w/h are recorded.

cls4

I didn't know that tax attributes could be set on the pension account for transfers out. Thank you.